The head of China’s central bank on Sunday gave his full support to the national cap-and-trade programme and said the bank would develop ETS-related risk management guidelines that observers say are likely to boost investor participation in the market.

Zhou Xiaochuan, governor of the People’s Bank of China (PBOC), made the comments at the China Development Forum, local media reported.

Market participants saw Zhou’s comments as evidence that the planned market – championed by the National Development and Reform Commission – has won favour with one of China’s most powerful institutions.

“Since the PBOC supervises the interbank market – currency trading and central clearing – PBOC-owned institutions such as the Shanghai Clearing House and China Foreign Exchange Trade System are likely to develop products for the interbank market associated with secondary market CO2 allowance trading,” one market observer told Carbon Pulse.

If traders and brokers in the interbank market build their interest in the emissions market, the national ETS would take an important step towards avoiding the lack of liquidity seen in China’s seven regional pilot carbon markets.

Zhou did not specify when PBOC’s risk management guidelines would be finalised.

Meanwhile, Reuters reported on Monday that Jiang Zhaoli, a senior climate change official with the NDRC, said in Shenzhen Saturday that he expected the national emissions trading scheme to commence in July 2017, covering 4 billion tonnes of CO2.

By Stian Reklev – stian@carbon-pulse.com

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